Additional Paid In Capital

An accounting concept that measures the amount a company raises from a stock sale above what the stock was worth when it was first issued.

So if a company sells stock in an initial public offering at $10 per share, and then the price rises to $15 per share, that extra $5 per share gets booked as additional paid-in capital. A gift. Like the booties mom throws in to the Christmas package as an extra to the sweater and underwear packs.

This concept only applies when the company sells shares at a higher price than the original issuing amount (this initial price is known as the "par value" for the stock). It also only comes into play when the shares are sold to raise capital. If both those conditions apply, the value of the shares above the par value is booked as additional paid-in capital on the firm's financial statements.